We all remember the story of Goldilocks and the Three Bears. One bowl of porridge was too hot, one was too cold, and one was just right. Pricing your products or services works much the same way. If your prices are too high, you risk scaring away customers. If they are too low, you may be leaving money on the table or undermining your ability to cover rising costs. The challenge is finding that “just right” zone: the sweet spot where your pricing sustains your business and resonates with your customers.
In today’s economy, this balancing act is trickier than ever. Inflation continues to affect the cost of raw materials, utilities, and everyday supplies. Rising labor costs are putting pressure on payroll budgets, especially for small businesses trying to attract and retain good employees. Rising tariffs and ongoing supply chain disruptions are contributing to higher prices for the inventory, packaging, and equipment your business depends on. Against this backdrop, reviewing your pricing strategy regularly is not just a smart move, it is a necessity.
So how do you know whether your prices are too high, too low, or just right? Let’s look at three key things to consider as you evaluate your current pricing.
The Cost Perspective
The first bowl of porridge in Goldilocks’ story was too hot, and in pricing terms, this is when your costs are burning up your profits. If your expenses have increased but your prices have stayed the same, you may be eating into your margins without realizing it. Rising labor costs, increases in material prices, and higher utilities all chip away at profitability.
Take time to calculate your break-even point. What does it actually cost to deliver your product or service, including direct costs like materials and labor as well as indirect costs like rent, insurance, and marketing? If your current prices do not comfortably cover those costs and leave room for profit, they may be too low.
The Market Perspective
Goldilocks found the second bowl of porridge too cold, and this mirrors what happens when your prices are out of sync with the market. If your prices are significantly higher than your competitors without a clear difference in quality or value, potential customers may go elsewhere. On the other hand, pricing too low can also raise red flags. Customers may wonder whether your quality is lacking, or you may attract price-sensitive buyers who will leave the moment someone else offers a discount.
Look at what others in your industry and region are charging. While you do not need to copy your competitors, understanding where you fit within the market helps you make intentional decisions. If you are charging more, be prepared to explain the added value you provide. If you are charging less, make sure you can sustain it without eroding your margins.
The Value Perspective
Finally, Goldilocks found the third bowl to be just right. In pricing, this happens when the value you deliver aligns with what your customers are willing to pay. Value is not just about the product itself. It is about the experience, the reliability, the convenience, and the outcomes your customers receive.
Ask yourself: Are my prices communicating the value I provide? Do my customers feel that they are getting their money’s worth? In times of inflation or rising costs, customers may be more price-sensitive, but they are often willing to pay more if they clearly see the benefits of choosing you over someone else.
Finding Your “Just Right” Price
There is no one-size-fits-all answer to pricing, but like Goldilocks testing each option, you can weigh your choices until you find the balance that fits. Pricing is a blend of understanding your costs, staying aware of the market, and recognizing the value you deliver. As the economy shifts, it is important to check in regularly and adjust before things become too hot or too cold.
The good news is you do not have to figure it out on your own. Ignite can help you run the numbers, evaluate your competition, and align your pricing strategy with the true value of what you offer. Together, we can help you land in the Goldilocks Zone, where your prices are not too high, not too low, but “just right” for your customers, your growth, and your bottom line.